Kaal claims by topic: dynamic-regulation

291 atomic, individually citable claims from the published work of Wulf A. Kaal tagged dynamic-regulation.

A uniform approach to hedge fund valuation is not possible because the variety of hedge fund investments and strategies means some positions, such as non-concentrated positions in liquid securities, are far easier to value than others. 2009
Retail investors are more likely to benefit from investor protection rules that optimize hedge fund valuation, because their minority position in the industry, the absence of informal rules, and management's lack of incentive to protect them leave them unprotected. 2009
Limiting complex financial instruments in the portfolios of hedge funds open to retail investors, triggered once retail commitments exceed a set level of assets under management, would likely protect retail investors while limiting undue burdens on the industry. 2009
Investor suitability standards would address the sophistication problem by requiring independent verification that investors in highly complex financial products can evaluate investment risk independently and are capable of making independent investment decisions. 2009
A country whose bankers do not embrace intentional risk taking is still exposed to risk, both through the collateral effects of intentional risk taking abroad and through unintentional risk taking at home, so domestic cultural restraint is not a sufficient safeguard. 2010
Because policymakers may adopt a suboptimal single trigger design, and because contingent capital has uses at several points in a firm's life cycle, contingent capital securities should be built with sequential triggers rather than one. 2011
Asymmetric hedge fund regulation, in which Dodd-Frank and the AIFM Directive regulate banks and hedge funds separately and differently, is counterproductive. 2011
The SEC would be better advised to interpret the rulemaking authority it received from Congress than to increase requirements on hedge funds in order to address concerns over potential systemic risk. 2011
Implementing the hedge fund lending charge through Basel III would require no separate national implementation, because compliance falls on banks that have already joined the framework, so transaction costs for national regulators would be avoided. 2011
The SEC, rather than the courts or Congress, is the institution positioned to implement a choice of law regime for securities transactions, through rulemaking. 2012
The SEC's 2004 attempt to reach hedge fund advisers failed as a matter of administrative law: in July 2006 the D.C. Circuit vacated the hedge fund rule in Goldstein v. SEC as an instance of arbitrary rulemaking, because the SEC had no authority to define a term the Advisers Act left undefined. 2012
Because Title IV's registration exemptions are broad enough to threaten the rule they qualify, the Dodd-Frank Act deliberately gives the SEC rulemaking authority to keep the exemptions from swallowing the rules. 2012
Because both European regulatory initiatives and the United States academic debate concentrate on the technical design features of contingent capital securities, the possible corporate governance applications of those securities are mostly ignored. 2012
Where jurisdictions are not compelled to agree on the same rule, some jurisdiction will try a different rule, and will do so more quickly, when changed economic circumstances make a different rule optimal. 2012
The social welfare maximization potential of contingent capital securities is lower if their design features are left entirely to private ordering, because private parties do not necessarily structure those features with a view toward the common good, the avoidance of future bailouts, or the limitation of systemic risk and contagion. 2012
Contingent capital can facilitate an incentive structure that lets regulators rely partially on private party contracting for the design of these securities while still accounting for systemic risk. 2012
Stable rules may not suffice to make directors' oversight role more robust, so contractual and quasi law forms of dynamic governance are a promising supplement for improving the duty of oversight. 2013
The shortcomings of stable rules, especially the perpetual need for rule enactment and revision, justify a supplemental dynamic approach to regulating the financial industry that enhances and extends the established regulatory framework rather than replacing it. 2013
Dynamic Regulation is defined as an adapting governance mechanism that is constantly evolving and adjusting to the given market environment, financial innovation, and regulatory environment. 2013
Dynamic Regulation could help avoid the regulatory sine curve and its negative and costly consequences, and could provide a self enforcement mechanism independent of the existing regulatory structure and agency enforcement. 2013
Dynamic Regulation may enable regulators to anticipate future changes and challenges and to adapt stable rules accordingly. 2013
Because economic conditions and the corresponding requirements for optimal and stable rules are constantly evolving, a rule set that is optimal at enactment ceases to be optimal over time. 2013
Dynamic regulation could dampen the volatility of both the cosine curve describing common elements of financial crises and the regulatory sine curve, by creating an anticipatory rather than reactive regulatory response. 2013
Congress, financial regulators, and the financial regulation literature rely almost exclusively on rules presumed to be stable and optimal, which is the common denominator of regulatory responses to crises. 2013
Rulemakers discount or willingly accept unknown future contingencies and the inevitable need for later revision, amendment, and retraction, because they are pursuing certainty and predictability in the rules they enact. 2013
Dynamic elements built into the regulatory structure would allow regulators to continually adapt to new market environments, to financial innovation, and to changes in financial markets that are themselves caused by financial regulation. 2013
The regulatory sine curve itself may be inevitable, but its costly and suboptimal regulatory effects can nonetheless be limited. 2013
Financial rulemaking is most needed ex-ante before financial crises, not ex-post after crises have already imposed steep costs on the economy, markets, and financial institutions and have distorted the rulemaking process itself. 2013
The aftermath of a financial crisis creates shock conditions that constitute a suboptimal environment for rulemaking. 2013
Post-crisis rulemaking occurs in an economic, political, and legal environment whose sense of urgency prevents a full evaluation of the consequences of new rules for all affected constituencies. 2013
The shock conditions that trigger calls for rulemaking have typically not been analyzed or absorbed systematically, so rulemaking under those conditions is associated with high levels of incomplete information. 2013
The bounded rationality of public rulemakers aggravates shock conditions during rulemaking, because rulemakers satisfy their own constituencies rather than all affected parties and are therefore more willing to act on incomplete information. 2013
The SEC's failure to interpret Section 402 of Sarbanes-Oxley, while not a formal retraction, shows that Section 402 is another instance of politically motivated rulemaking that later has to be scaled back. 2013
Business and regulatory cycles will persist, but optimizing the relationship between indicators of financial crises and the regulatory sine curve, especially the timing of regulatory responses, could soften some of the effects of crises. 2013
Increasing the availability of relevant information for rulemaking through a countercyclical and dynamic process is a starting point for improved rulemaking. 2013
Dynamic regulation is the antithesis of static, stable, and presumptively optimal regulation, and it is intended to counterbalance the effects of stable and presumptively optimal rules rather than replace them. 2013
The increasing volatility of financial markets combined with financial innovation parallels the pace of technological development in telecommunications, the industry where dynamic regulation has predominantly been applied. 2013
Although some regulators use the term dynamic regulation in the context of SEC exemptive powers, the literature on financial regulation mostly ignores dynamic elements for regulation. 2013
Regulatory cycles would benefit from supplementing, rather than replacing, the existing regulatory framework with dynamic elements. 2013
Dynamic financial regulation is the study of financial regulatory phenomena in relation to both preceding and succeeding events, by analogy to economic dynamics. 2013
In a dynamic framework rulemaking ceases to be a merely reactive process driven by the collective action problem, and instead increasingly uses institution specific and decentralized information that both reflects preceding events and anticipates future contingencies. 2013
Rulemaking with dynamic elements increases the adaptive capabilities of financial regulation through the increasing use of institution specific information, including information on how financial institutions and their decision makers actually act and are expected to react to unforeseen contingencies. 2013
Experimentation with different combinations of regulatory approaches is effective when several different approaches can be tried simultaneously in different jurisdictions. 2013
Dynamic elements can help anticipate and preempt financial crises by changing the timing of regulation, the availability and quality of information, and the emphasis of regulation. 2013
Financial rulemaking often relies on centralized rather than decentralized information, which is a further defect of the existing framework. 2013
Including dynamic elements converts the sine curve of financial regulation into an anticipatory sine curve in relation to the phase-shifted first derivative, the cosine curve, that describes the common elements of financial crises. 2013
Depending on their design, contingent capital securities can function as an early warning system that helps preempt financial crises. 2013
Managers are incentivized to manage their institutions so as to avoid contingent capital triggers, and that incentive itself can optimize the governance of financial institutions. 2013
The institution specific and decentralized information generated by deferred prosecution agreements allows regulators to better understand shortcomings in a particular market segment or industry, so that rulemaking can be more narrowly tailored. 2013
Adding dynamic elements to financial regulation would cause the sine curve of financial regulation to start its upward slope before the occurrence of financial crises, thereby dampening regulatory cycles. 2013
Dynamic regulation is an optimization process for the learning experience in the New Institutional Economics framework, describing intra- and inter-jurisdictional feedback effects between different public rulemakers and between private and public rulemakers. 2013
Dynamic elements in the rulemaking process increase the availability of relevant information for rulemaking and thereby improve institutional design. 2013
Dynamic regulation as part of institutional design in the evolution of law has not been systematically analyzed, despite an existing economics literature applying dynamic regulation to telecommunications, learning by doing, and principal-agent problems. 2013
The institutional infrastructure for rulemaking was designed for a relatively stable society and stable economic and market environments, and it therefore fails to keep pace with rapidly evolving and increasingly complex modern markets. 2013
Trial-and-error rulemaking is suboptimal because participating actors acquire the necessary information ex-post, only after rules have turned out to be suboptimal, rather than increasing the availability of relevant information ex-ante. 2013
The feedback effect between different public rulemakers and between private and public rulemakers reduces incomplete information, which in turn enables the rulemaker to modify the next action in the rulemaking process. 2013
Supplementing the rulemaking process with dynamic elements increases the public rulemaker's ability to adapt public rules to unknown future states, and thereby curtails public trial-and-error rulemaking. 2013
Rules can be adaptable only if the institutions and rulemaking processes that produce them integrate dynamic elements that generate timely, relevant, and decentralized information for rulemaking. 2013
Dynamic regulation is a form of Popper's piecemeal social engineering rather than holistic or utopian social engineering, because it is a piecemeal optimization process for institutional design with a largely private character. 2013
Under dynamic regulation a presumption of reform feasibility is unnecessary because the feedback effect makes ad-hoc decisions obsolete, curtailing centralized planning and minimizing unintended actions. 2013
Rules should be promulgated only after the particularized need for the rule has been identified and possible effects on society at large have been evaluated. 2013
Private rulemakers have a comparative advantage over public rulemakers in the dynamic regulation framework because public rulemakers lack comparable access to timely and institution-specific information. 2013
In the conventional NIE learning process, the requirements for rules and their adaptability to future states become clear only after stable and presumptively optimal rules have already emerged as suboptimal, so anticipation of future developments plays no role and learning is confined to learning from mistakes. 2013
Opportunities for integrating dynamic elements into the rulemaking process include intra-jurisdictional feedback processes, feedback effects between private and public rulemakers, inter-jurisdictional feedback processes, informal rules, and organizational culture. 2013
Parties subject to informal rules signal their preferences and efficient solutions to the public rulemaker, so informal rules and practices supply additional information that modifies rulemakers' actions and improves rulemaking. 2013
Unlike ordinary private ordering, where formalization of informal rules can be a lengthy process that is never finalized, formalization of informal rules in the dynamic process happens sooner and is more likely to succeed if those informal rules provide relevant information for public rulemaking. 2013
Public rulemakers rely on stable and presumptively optimal rules because they lack necessary, comparable, decentralized, and institution-specific information. 2013
Private rulemakers can work with and utilize decentralized information continuously, which enables them to react in a timely fashion to emerging, decentralized, and institution-specific information, while public rulemakers are limited in the information they can obtain. 2013
The feedback process between public and private rulemakers increases the availability, timeliness, and quality of information available to the public rulemaker, which induces and supports a learning process and creates incentives for that learning. 2013
Consumer opt-out from existing rules creates a feedback effect for the public rulemaker: when a critical mass of opt-outs signals that a different rule may be optimal, it triggers a modification of the rulemaker's next action. 2013
Contractual incompleteness can be lowered through dynamic processes within the rulemaking process, because dynamic elements improve the availability, timeliness, and quality of information via the feedback process. 2013
Rules, especially in financial regulation, are mostly enacted when it is politically opportune rather than when appropriate information for rulemaking is available. 2013
A classic collective action problem controls rulemaking: smaller and better organized special interest groups usually dominate latent groups such as dispersed investors in the competition to shape rules. 2013
During and after crises, political entrepreneurs assume the transaction costs of organizing otherwise disinterested latent groups, temporarily overcoming the predominance of special interest groups in the rulemaking process. 2013
The collective action problem and the cyclical nature of rulemaking are likely to persist, which makes alternatives and supplements to existing institutional designs for rulemaking more relevant. 2013
Dynamic regulation should supplement existing institutional designs for rulemaking in order to counteract the negative consequences of cyclical rulemaking and improve corresponding institutional designs. 2013
Contracting parties need to postpone the specification of obligations only if the feedback process in the dynamic framework did not generate sufficient information; where sufficient information is available, contractual incompleteness can be lowered. 2013
Assessing the sufficiency of information by rulemakers alone can lead to suboptimal results because path dependencies may lead decision-makers to believe they control sufficient information for rulemaking when in fact they do not. 2013
The availability of information generated through the dynamic feedback process cannot be optimized at any given point in time, because the feedback effect is intended to perpetually reinforce itself. 2013
Dynamic regulation takes issue with the broad scope of contractual incompleteness and delayed decision-making assumed by the incomplete contract model, contesting the view that such incompleteness and delay are always necessary. 2013
Dynamic regulation helps rulemakers anticipate how institutions will react to circumstances as they arise, because the feedback process provides decentralized, timely, and institution-specific information, allowing rules to be adjusted ex-ante in anticipation of future contingencies. 2013
The broad scope for contractual incompleteness and delayed decision-making stipulated by the incomplete contract model are necessary only if the feedback effect did not produce sufficient information for rulemaking. 2013
The feedback process in dynamic regulation may be viewed as a focal point or principle for rulemaking, enabling rulemakers to provide for contingencies ex-ante and to adopt rules that are applicable and adaptable to future states of the world. 2013
Because dynamic regulation supplies information ex-ante via a feedback process before rules are finalized, certainty for involved parties is not affected ex-post after rules become effective, so contractual incompleteness is lowered while certainty in rulemaking is maintained. 2013
The feedback effect in dynamic regulation, as part of the organizational culture of rulemaking, may allow cooperation and coordination not only among private actors but also among public rulemakers and between private and public rulemakers. 2013
The combination of multiple feedback processes results in a sequence of mutually-reinforcing, information-enhancing events that minimizes ex-post trial-and-error experimentation with stable rules after those rules have already emerged as failures. 2013
Under dynamic regulation, ex-ante experimentation before the enactment of rules becomes the focal point of rulemaking, and anticipation of and adaptability to future contingencies become part of the rulemaking process. 2013
The growing number of conflicting decisions under old Rule 2019, and the confusion and uncertainty they produced, is what precipitated the concerted effort by bankruptcy practitioners and the federal bankruptcy bench to revise the rule. 2013
The SEC mandated written compliance policies and procedures for investment advisers as a reaction to mutual fund industry scandals and in an effort to curb IAA violations. 2013
Dynamic regulation is a supplemental regulatory tool, not a replacement for existing rulemaking: it increases the availability of relevant, institution specific, and decentralized information for rulemaking through feedback effects. 2014
Anticipatory dynamic elements in regulation reduce the need for costly and suboptimal ex post trial and error experimentation with stable and presumptively optimal rules. 2014
Rulemaking in a dynamic framework postpones the enactment of rules until rulemakers hold sufficient relevant and institution specific information, instead of proceeding by trial and error under incomplete information and bounded rationality. 2014
Under incomplete contract theory the rulemaking process is itself a learning process, and incomplete contracts are the instrument that carries that learning. 2014
A core tenet of incomplete contract theory, that rulemakers should act only when sufficient information becomes available, is often politically, economically, and practically undesirable or impossible. 2014
Because rulemaking is subject to regulatory cycles and to a classic collective action problem, rules are generally not enacted at the moment appropriate information for rulemaking becomes available. 2014
In the current model of stable rulemaking, path dependencies lead rulemakers to act on a boundedly rational assumption that they already control sufficient information for rulemaking. 2014
Private rulemakers hold a comparative informational advantage over public rulemakers because they can produce and react to necessary, comparable, decentralized, and institution specific information that public rulemakers cannot readily obtain. 2014
Interaction and exchange of emerging information between public and private rulemakers creates a feedback process that increases the availability, timeliness, and quality of information available to the public rulemaker. 2014
Feedback effects allow the necessary information to be acquired ex ante and necessary revisions to be anticipated before rules emerge as suboptimal, rather than ex post after failure has become apparent. 2014
The trial and error approach to rulemaking structurally prevents rulemakers from obtaining relevant information ex ante, before rules are enacted. 2014
Costly regulatory cycles become less likely if the regulatory framework integrates dynamically adapting elements, because rule revisions, revocations, and reenactments become less necessary. 2014
Trial and error rulemaking could become obsolete if dynamic elements in rulemaking processes systematically anticipated future contingencies and the corresponding regulatory needs. 2014
Contrary to the dominant view of corporate governance as a forward looking endeavor, dynamic governance structures are properly categorized as backward looking ex ante forms of corporate governance. 2014
Entity specific rulemaking via governmental contracts rests on a higher overall level of relevant and decentralized information than ordinary rulemaking, because the regulatory action follows an entity specific investigation of wrongdoing. 2014
Tailoring regulatory solutions to identified regulatory necessities through governmental contracts and then observing how those solutions perform over time lets rulemakers anticipate regulatory demands, which is institution specific ex ante experimentation. 2014
Investigation, self reporting, and preemptive remedial measures enable anticipation of future contingencies for rulemaking, because investigating additional institutions in the same industry lets the government pinpoint the exact need for regulation more precisely. 2014
Dynamic governance structures involving governmental contracts are backward looking because the multilevel feedback effects they generate require an exchange of information about past events in order to anticipate future regulatory contingencies. 2014
Standardizing private fund adviser reporting obligations is the author's proposed remedy for the shortcomings advisers identified, because standardization attacks the ambiguity and inefficiency in the reporting requirements at their source and simplifies the disclosure regime. 2014
A single standardized reporting model will not suffice: because different types of private fund advisers have competing needs, policy makers should evaluate several different models for standardizing Form PF reporting. 2014
Regulators can learn from the preemptive remedial measures corporate wrongdoers institute, because those measures reveal where governance concerns lie in a particular industry and where regulatory action is increasingly needed. 2014
Department of Justice investigations of particular corporate wrongdoers generate highly relevant, decentralized, and institution specific information that is usable for rulemaking. 2014
Regulation by prosecution denies corporations the channels of influence available under legislative and administrative rulemaking, since it offers no comment process and no opportunity to lobby regulations in their favor. 2014
In the long run, increased regulation by prosecution may be able to offset many of the shortcomings of legislative governance reform, even though it is less predictable than legislation. 2014
Based on these findings, adviser size may not matter as much for policy adjustments and SEC rule making as the hedge fund industry and its representatives have claimed. 2014
Accuracy and consistency problems in the SEC's private fund data collection can impair the FSOC's ability to evaluate the systemic risk posed by private fund advisers. 2014
Form PF data was tailored primarily for the FSOC rather than for the SEC's own purposes, a design choice that shaped the level of reporting required. 2014
The quantitative measures used in systemic risk assessment are not codified in statute, so the FSOC can alter its thresholds and its analysis through rulemaking. 2014
Form PF instructions need clarification and its definitions, including those for RAUM and AUM, need improvement, since there is evidence that questions and definitions had to be optimized. 2014
Fixing the identified problems with Form PF data would help optimize the FSOC's systemic risk assessment of private funds. 2014
Confluence is not one directional: the SEC may counteract some confluence drivers, for instance by curtailing derivative trading and short selling used by retail alternative mutual funds to mimic hedge funds. 2016
Proposed SEC Rule 18f-4 is a potential threat to the alternative mutual fund business model, because its risk based portfolio limit could undermine managers' ability to implement their investment strategies using derivatives. 2016
The pacing problem arises from a two sided divergence: innovation driven by science and technology is accelerating at the same time that federal and state agencies' regulatory processes have slowed down and continue to slow down. 2016
Although the extent and causes of rulemaking ossification remain empirically uncertain, increased legal and evidentiary burdens on regulatory authorities are the consensus explanation for the slowdown in agency rulemaking. 2016
The most widely recognized drawbacks of traditional rulemaking under the Administrative Procedure Act are its lack of speed, its cumbersomeness, and the volume of litigation generated by its notice and comment procedures. 2016
The pacing problem is partly a byproduct of the goal of legal certainty: because regulation is designed to be a durable source of predictability, rulemaking driven by legal certainty cannot keep pace as innovation accelerates. 2016
Facts based, ex post, trial and error rulemaking cannot anticipate the regulatory issues created by innovation, so rulemakers may never recognize, or may recognize only much too late, which new regulatory demands apply to a given innovation. 2016
Rulemakers rely almost exclusively on stable and presumptively optimal rules meant to be permanent solutions, and that reliance ignores the ever changing rule environment driven by exponential growth in technology and innovation. 2016
Formal rulemaking in the existing regulatory infrastructure is almost always too time consuming, because product innovation moves fast enough that regulations covering an innovative product are obsolete before they are finalized. 2016
The existing regulatory framework is sub optimally equipped to remedy both existing and future regulatory challenges associated with exponential innovation, which is the first premise for integrating dynamic elements into the regulation of innovation. 2016
Dynamic elements in the regulation of innovation are a supplement to the existing regulatory framework rather than a replacement for it, and their intent is to optimize that framework. 2016
The three core law and technology proposals for the pacing problem, regulation via the judiciary, early stage regulation of innovation, and principles based regulation, all have practical limitations and none of them uses dynamic regulatory elements. 2016
Dynamic regulatory mechanisms are already replacing litigation and will continue to replace it. 2016
Deferred prosecution agreements produce relevant, real time, decentralized, high quality information for regulation in most industries and are used as a preferred alternative to litigation by both prosecutors and corporations. 2016
Deferred prosecution agreements produce superior feedback effects for regulation because the prosecutor's investigation and the negotiation and execution of the agreement signal regulatory needs in real time. 2016
Early regulatory intervention becomes unnecessary in a dynamic regulatory framework, because the regulatory challenges associated with innovation would become transparent in real time through improved, decentralized information and feedback effects. 2016
In the dynamic regulatory framework, feedback effects and real time information permit regulatory intervention if and only when it is needed, which avoids stunting innovation through negative early signals, the inability to keep pace with later stage innovation, and information asymmetries. 2016
Because dynamic regulation operates as a supplement inside the existing rulemaking framework, it does not require the costly implementation that a shift to principles based regulation would require. 2016
Anticipatory rulemaking in the dynamic framework is accomplished by combining institution specific, decentralized, and timely information with feedback effects, which can occur between public and private rulemakers, between outcomes and institutions, across jurisdictions, and between rules and rulemaking processes. 2016
Deferred prosecution agreements and venture capital investment decisions increase the availability of relevant, decentralized, and timely information for rulemaking and give at least some estimate of where innovative trends exist and what regulatory challenges may accompany them. 2016
Dynamic regulatory tools lower unforeseen contingencies in innovation related rulemaking because their feedback effects supply relevant, timely, decentralized, and institution specific information ex ante, which also helps maintain certainty in the rulemaking process. 2016
Private rulemakers hold a comparative advantage over public rulemakers because they often can produce and access necessary, comparable, decentralized, and institution specific information for rulemaking and can react more readily to emerging information. 2016
Rules operate as a feedback effect on the rulemaking process itself: rules with suboptimal characteristics result from institutional arrangements and then reinforce those suboptimal arrangements, and stable presumptively optimal rules reinforce an institutional structure that perpetuates stability in rules. 2016
Dynamic regulation optimizes anticipatory governance for innovation by emphasizing adaptation to and anticipation of the unforeseen contingencies associated with innovation. 2016
Rulemaking in the dynamic framework is an integral part of innovation that both supports innovation and curtails it, for innovation's own sake and for the maximization of societal welfare. 2016
Regulation of innovation in a dynamic framework is triggered only as a supplement to the existing rulemaking framework, and only if and when feedback effects anticipate otherwise unforeseen contingencies and regulatory needs associated with innovation. 2016
Regulation is usually reactive because it responds to facts, but the current environment is one of data rather than settled facts; regulation must therefore become proactive and dynamically responsive to data and trends. 2016
Ex post facts-based, trial-and-error rulemaking combined with stable and presumptively optimal rules often produces suboptimal regulatory outcomes, and those outcomes are no longer sustainable in an environment of exponential disruptive innovation. 2016
In an environment of exponential disruptive innovation, the information rulemakers need is less likely to materialize soon enough for traditional rulemaking to be effective, regulatory issues become more complex, and unknown future contingencies increase substantially. 2016
Dynamic regulation is defined as conceptualizing regulatory phenomena in relation to both preceding and succeeding events, using institution-specific and decentralized information to generate feedback effects that support anticipatory rulemaking. 2016
Data derived from venture capital investments can function as a dynamic regulatory supplement for disruptive innovation, because venture capital's financial allocations to innovative projects supply feedback for dynamic regulation. 2016
The current regulatory framework lacks any mechanism that anticipatorily informs rulemakers of beneficial innovative ideas, and because the rulemaking process prohibits ex parte communications and integrates cross-industry brainstorming poorly, the process may actually undermine innovation. 2016
The ex post facts-based approach to rulemaking worked historically because the optimal requirements for rules only become clear once stable and presumptively optimal rules have already emerged as suboptimal; the availability of that information is therefore a prerequisite for rulemaking. 2016
Because facts-based rulemaking does not anticipate the regulatory issues created by innovation, rulemakers may realize far too late, or never, what new regulatory demands a given innovation generates. 2016
Stable and presumptively optimal rules are created to address regulatory issues that lawmakers perceive through centralized information under then-existing economic and market conditions, and are drafted as permanent solutions to those perceived issues. 2016
Because rulemakers are increasingly unlikely to be able to protect the public through stable and presumptively optimal rules alone, regulatory supplements that enable anticipatory rulemaking become justified. 2016
Formal rulemaking is simply too time-consuming for an environment of disruptive innovation; the speed of product innovation alone makes formal rulemaking in the existing infrastructure unworkable. 2016
Because formal rulemaking takes months and often years, regulators are still processing the previous product launch while new products reach the market, and new regulations pertaining to an innovative product can be obsolete before they are finalized. 2016
Because it lacks anticipatory capabilities, the existing regulatory system only addresses regulatory issues ex post, and then only if core constituents are burdened enough to generate sufficient political pressure for lawmakers to act. 2016
Evidence exists that the suboptimal ex post timing of rulemaking in the existing regulatory infrastructure regularly forces expedited rulemaking, which in turn produces suboptimal regulatory outcomes. 2016
Despite their insufficient anticipatory capabilities and known downsides, stable and presumptively optimal rules remain the uniform response to perceived regulatory issues. 2016
The collective action problem of rulemaking, the problems of trial-and-error rulemaking, and the problems of regulatory cycles derive largely from the nature of stable and presumptively optimal rules themselves, not from unrelated institutional defects. 2016
Adaptive rulemaking helps overcome the collective action problem of rulemaking because when there are fewer stable rules, latent majority groups and dominant minority groups have fewer opportunities to influence a continuously and timely adapting process. 2016
Regulatory cycles and trial-and-error rulemaking become less prevalent under adaptive rulemaking because adaptive capabilities supplement stable rules, making rule revisions less frequent. 2016
Unrestricted exchange of information between public and private rulemakers creates regulatory synergies that increase the availability of relevant, decentralized, and timely information for rulemaking and thereby generate feedback effects. 2016
Through feedback effects, rulemakers in a dynamic regulatory framework can adopt rules that are adaptable to future states of the world rather than fixed to current conditions. 2016
Dynamic regulatory tools lower unforeseen contingencies in rulemaking because the feedback effect supplies relevant, timely, decentralized, and institution-specific information ex ante, allowing rulemakers to adapt to contingencies as they arise. 2016
By identifying possible contingencies and necessary rule revisions with optimized ex ante information, dynamic regulatory supplements make adaptive rulemaking rather than stable rulemaking the focal point of the regulatory process. 2016
Dynamic regulatory supplements would not violate the procedural mandates of the Administrative Procedure Act, because the full lawmaking process still applies; dynamic regulation supplements rather than replaces the existing rulemaking process. 2016
Although aggregate venture capital sector data arguably only confirms what media reporting already showed for 2005 to 2015, the venture capital data, especially examined granularly, may provide earlier signals for regulators to identify areas of prospective regulatory need. 2016
Venture capitalists' finance allocation and their implicit assessment of innovative products, businesses, and initiatives generate highly relevant institution-specific and industry-specific decentralized information on innovation trends. 2016
Regulation is mostly reactive and follows business cycles rather than being proactive; data on venture capital investments lets regulators see where innovation trends are heading and what risks they entail before the disruptive innovation actually materializes. 2016
Feedback effects from venture capitalists' finance allocations toward innovative products give rulemakers timely, decentralized, industry-specific and entity-specific information that allows them to adapt rules in anticipation of regulatory issues. 2016
Even if regulators could obtain the depth of information needed for anticipatory rulemaking, acting on venture capital signals risks wasting scarce regulatory resources, because venture capital funds make many investments that do not succeed and companies still incubating may raise no clear regulatory issues. 2016
Regulators should take anticipatory measures only after cross-validation and triangulation, that is, when multiple independent data analyses point unanimously toward a specific demand for regulatory action. 2016
No regulatory processes or data evaluation capabilities currently exist that could carry out the cross-validated analyses and support the anticipatory regulatory action the authors propose. 2016
Companies that received venture capital investments have outrun and continue to outrun regulation and regulatory efforts, and they drive innovation trends in the United States and abroad. 2016
The SEC's 2004 hedge fund adviser registration rule failed in court because the agency lacked authority to define the term client, which the Investment Advisers Act had not otherwise defined, and the D.C. Circuit in Goldstein vacated the rule as arbitrary rulemaking. 2016
The SEC's 2004 attempt to require hedge fund adviser registration failed: after the D.C. Circuit vacated the rule in Goldstein v. SEC, the overwhelming majority of private fund advisers that had registered under the 2004 requirements deregistered. 2016
Because quarterly Form PF filing costs roughly $10,000 per reporting fund, the $1.5 billion threshold that triggers quarterly filing gives advisers a direct cost reason to factor that threshold into the AUM decision. 2016
After the D.C. Circuit vacated the SEC's 2004 hedge fund adviser registration rule in Goldstein v. SEC, the overwhelming majority of private fund advisers who had registered under that rule deregistered. 2016
The same SEC implementation and clarification of Dodd-Frank registration and reporting requirements that helps the industry comply also creates uncertainty and higher costs for it, so continuing rule development cuts both ways. 2016
Proposed Rule 18f-4 would be highly limited in mitigating liquidity and other risks in an unconstrained mutual fund portfolio, because material leverage, counterparty, and liquidity risks in such a fund can arise from investments in a range of non-derivative instruments that the rule does not reach. 2016
Ex post trial and error rulemaking built on stable and presumptively optimal rules produces suboptimal regulatory outcomes that are no longer sustainable once disruptive innovation grows exponentially. 2016
Under exponential disruptive innovation the information rulemakers need arrives too late for trial and error rulemaking to be effective, regulatory issues grow more complex, and unknown future contingencies in the rulemaking process increase substantially. 2016
Exponential disruptive innovation has the potential to overwhelm the existing regulatory process outright, not merely to strain it. 2016
Dynamic regulation is defined as the study of regulatory phenomena in relation to both preceding and succeeding events, using institution specific and decentralized information to generate feedback effects that support anticipatory rulemaking. 2016
Venture capital can function as a dynamic regulatory supplement for disruptive innovation because venture capitalists' financial allocations to innovative projects generate feedback that regulators can use. 2016
The current regulatory framework contains no mechanism that succinctly and anticipatorily informs rulemakers of beneficial innovative ideas, which is the specific informational gap the article proposes to fill. 2016
The existing rulemaking process prohibits ex parte communications and insufficiently integrates brainstorming and ideas across industries, and therefore may actually undermine innovation rather than merely lag behind it. 2016
Ex post trial and error rulemaking requires as a precondition that information about optimized rule requirements becomes available, and in an age of exponential innovation that information may never materialize or may arrive too late for the method to work. 2016
The existing regulatory infrastructure, including Congress, agencies, self regulatory bodies, and the regulation literature itself, relies almost exclusively on stable and presumptively optimal rules. 2016
If rulemakers cannot adequately protect their constituents through stable and presumptively optimal rules, then regulatory supplements that facilitate anticipatory rulemaking are justified. 2016
Formal rulemaking is simply too time consuming for disruptive innovation: the speed of product innovation lets a new product reach the market while a rulemaking that takes months or years is still processing the previous product launch. 2016
New regulations aimed at an innovative product can be obsolete before they are finalized. 2016
Evidence shows that the suboptimal ex post timing of rulemaking regularly forces expedited rulemaking, and expedited rulemaking itself produces suboptimal regulatory outcomes. 2016
Adaptive rulemaking reduces the collective action problem because with fewer stable rules, latent majority groups and dominant minority groups have fewer opportunities to influence a continuously and timely adapting rulemaking process. 2016
Dynamic regulatory tools let rulemakers adapt to regulatory contingencies as they arise, because feedback effects deliver relevant, timely, decentralized, and institution specific information ex ante. 2016
Private rulemakers hold a comparative advantage over public rulemakers because, unlike their public counterparts, they can produce the comparable, decentralized, and institution specific information that rulemaking requires. 2016
Dynamic regulatory supplements do not violate the procedural protections mandated by the Administrative Procedure Act, because the full lawmaking process still applies and dynamic regulation only supplements and optimizes the existing rulemaking process. 2016
The data analysis shows that venture capitalists' finance allocation, and the implicit assessment of innovative products and businesses it embodies, generates highly relevant institution specific and industry specific decentralized information on innovation trends. 2016